Nationally, in 2009, the benchmark plan under the Ryan-Wyden framework (ie, the second-lowest plan) bid an average of 9% below traditional Medicare costs (traditional Medicare was equivalent to approximately the tenth-lowest bid). Since traditional Medicare is simply another plan option under the Ryan-Wyden plan, a beneficiary in 2009 would have paid an average of $64 per month (9% of $717) in additional premiums to stay in traditional Medicare. Across the United States, 68% of traditional Medicare beneficiaries in 2009 (approximately 24 million beneficiaries) lived in counties in which traditional Medicare spending was greater than the second–least expensive plan and would have paid more to keep their choice of coverage. [] Furthermore, more than 90% of MA [Medicare Advantage] beneficiaries (approximately 6.6 million seniors, excluding those dually eligible or in employer plans) would have also paid more for the plan they chose.

Translation: Had it been implemented in 2009, the Ryan-Wyden plan would have cut federal spending on Medicare by at least 9%. If every beneficiary had been enrolled in traditional Medicare in 2009, the estimated savings would have been exactly 9%. But almost one-quarter of beneficiaries were enrolled in a Medicare Advantage plan (pdf), which was paid 14% more than the cost of traditional Medicare at the time. So, under the Ryan-Wyden approach that brings payments to plans down to or below the cost of traditional Medicare, the savings would be higher than 9%.

Of course, holding all else equal, the full plan premiums must be paid by someone. The authors tell us what proportion of beneficiaries would have been stuck with a higher bill: 68% of traditional Medicare enrollees and 90% of MA enrollees. Don’t expect them to be happy.

On the other hand, it’s not likely all else would remain equal. Some beneficiaries would switch plans to avoid higher premiums. Perhaps plans would find ways to economize on costs, become more efficient. That’s the hope (claim) of competitive bidding/premium support advocates anyway.

What’s also true is that the future will not be exactly like 2009, at least under current law.

Affordable Care Act (ACA) reforms to traditional Medicare may change these estimates by moving traditional Medicare toward improved incentives for cost and quality through accountable care organizations, bundled payments, and strengthening primary care. The ACA also aims to slow the growth of traditional Medicare costs by reducing fee increases for some health care institutions. If traditional Medicare costs slow but do not close the 9% gap entirely, as currently projected, millions of beneficiaries will still have to pay more, although less than $64 per month, to maintain their choice of coverage—assuming the benchmark stays the same. However, if the ACA reduces traditional Medicare costs enough so that traditional Medicare becomes the benchmark, beneficiaries would no longer pay more to keep traditional Medicare; instead, MA plans would be costlier than traditional Medicare and require a premium.

That the ACA will make traditional Medicare more efficient and less costly is the hope (claim) of advocates of the law. Of course there is no way to know which advocates — those of a Ryan-Wyden type plan or those in favor of the ACA’s path — are correct about the future. Each is a bold experiment. One just happens to be law and in the process of implementation. The other is in a relatively vague stage of proposal with no certainty of becoming law.

Though I’m supportive of competitive bidding (of a type and with certain safeguards and conditions), I also think we should let the provisions of the ACA play out, to see what happens, with adjustments as warranted. Since few in power, let alone a majority of Congress, advocate running both experiments simultaneously (which is possible — they’re not incompatible), we may get only one or the other. Or we may get none. That is, in fact, precisely what would be achieved by repeal without replacement, a highly plausible political outcome.

But it does not seem to make sense that “traditional Medicare was equivalent to approximately the tenth-lowest bid.” How could plans like the wide choice of Part C plans (HMOs, PPOs, and FFSs from multiple companies) and employer sponsored retiree insurance — which offer all the benefits of A/B (by law) plus catastrophic coverage not available in traidtional Medicare and/or much lower deductibles and co-pays for major medial than traditional Medicare and/or broader benefits than Traditional Medicare — come in consistently less expensive? Is it an issue with traditional Medicare efficiency (F/W/A) or an issue with the research’s methodology or is it definitional (benchmark, bid, etc.)?

Part C plans are funding the extra goodies you point to with overpayments from the federal government, i.e., payments well above their bids for the cost of the basic Medicare benefit. It’s those bids that are far below FFS. [Insert the standard argument of favorable selection here.]

I think what you are saying is that the premise of the JAMA research is that the Wyden/Ryan framework/bidding/rebate process would work the same as the Part C framework/bidding/rebate process works today. That doesn’t seem likely for multiple reasons, not the least of which is — I’m told — that the Ryan Budget assumes the same $1xx billion cuts to Part C rebates as already included in the Patient Protection and Affordable Care Act (PPACA).

But I still don’t follow the logic. Today are all the C plans pricing their A/B equivalence benefits at below cost and then adding catastrophic coverage (not every state), physicals/vision/etc., much lower co-pays and deductibles, etc. and still making a “profit” on a 10% rebate. (I am guestimating 10% average rebates; maybe if I get the article from the doctor I’ll know more. MedPAC tells me the spread is as much as 15% with bids prior to PPACA as lows as 95% of framework and rebates as high as 15% above bids.But they are not all that “generous.”)

I actually am more interested in the non-C-like policies that would come on the market, policies combining in some way the advatnages of A/B/Medigap/standalone-D or policies that employers would offer their retirees (increasingly only government employees of course). I guess the JAMA research did not consider those possiblities.

I don’t have access to the data the authors did, so I cannot answer your questions in detail. But, you can email the authors! We both have access to MedPAC reports. You might also look at the similar work by Coulam, Dowd, and Feldman.

Thanks. No answers were expected; my question about Part C was rhetorical. I am fairly sure the insurers don’t price their products that way, at least their HMO products.

I am also now (a doctor gave me the gated article) fairly certain the authors of the research are misreading Wyden/Ryan. And totally ignoring FFS. I did ask the authors many of these questions and more and they did not answer.

“I’m not understanding the misread and the ignoring of FFS. What do you mean?”

I’ve read the JAMA article twice now that I got a copy of it and I have about 20 questions I would put in two broad buckets noted in my earlier comments when I was basing my opinion on your abstract.

1. Probably most important, it appears the JAMA research did not consider in its analysis the non-Part-C-like FFS policies that would presumably come on the new Wyden-Ryan exchange, policies mimicing in some way the cocktail of features seniors get from the current A/B/Medigap-A-to-N/standalone-D menu or the even more generous policies that employers offer/would offer their retirees. Such policies (aggregating all their variations) are twice as popular as Plan-C options today and presumably would be at least as popular under the Wyden-Ryan plan when it kicks in in 2022 (especially after Plan C rebates go away)

(NOTE: It is unclear from the Wyden-Ryan white paper — and as you say at the top. that’s all Wyden-Ryan is so far — whether Wyden-Ryan would elminate separate supplements in lieu of single policies such as I list in number 1 above or whether it would still make seniors roll their own on top of the “New Wyden A/B.” But even if a senior still has to buy his or her coverage a la carte, it is a political certainly that that type of coverage will still be available. On the other hand Wyden-Ryan is explicit that it would eliminate Part C and its benchmark/bid/rebate system.)

2. My second set of questions relate to an apparent misreading of Wyden-Ryan by the research authors, for example seeming to take no recognition that there would be a “new Wyden-Ryan A/B” that includes catastrophic coverage and a different co-pay approach than current A/B. There are lot of these sorts of questions. The most important is how the Wyden-Ryan non-cap cap mechanism would affect the finding you note in your post above about having to pay $64 more per month for the same coverage (a finding that on the other hand might even be meaningless given the Wyden-Ryan change to the old A/B).

Then there are the math issues which I haven’t even begun to look at. For example, is it really $64 a month or 1/12th of $64 (just the part of the implicit A/B premium that the senior pays) . And how can the very bad coverage that old A/B has offered for the last x years cost significantly more than the nine plans that come in ahead of old A/B in the researchers’ table. The nine lowr cost plans must have some kind of high-deductible, highly tiered and limited network (but then, back to point 2, it looks like Wyden-Ryan wouldn’t allow such misleading plans).

Forgetting the fact that I don’t believe the Harvard numbers are meaningful, it actually looks to me like the $64 a month claim increase is incorrect. If the Harvard comparative numbers (lowest county bid vs. second lowest county bid vs. Medicare costs) did represent actionable research, it looks to me like I would have had to pay $32 less a month in 2009 under Wyden-Ryan, not $64 more. That is, my Part A/B premium would have been $64 instead of the $96.40 monthly premium seniors actually paid for Parts A and B in 2009.

As I said in earlier comments, I think this is a side show because the bigger issues are that benchmark/bid/rebate mechanism does not apply, changes to A/B were not factored in, FFS policies were not considered, and so forth.